Keep telecom a competitive market

The enhanced market share of 50% approved by an empowered group of ministers for the product of a merger of telecom operators within a circle has been welcomed by many as paving the way for consolidation in a fragmented industry. What is more to the point is the government’s intent to release additional spectrum for telecom use. Because this is the key to competition, in the absence of which consolidation can hurt consumers. Ever since the Supreme Court cancelled 122 licences, telecom tariffs have quietly been on the rise in India. Unless competition remains vibrant, the data revolution that India needs will stand aborted, even as telcos and the government make their money.

A 50% cap on market share is not, by itself, anti-competitive. The real issue is ease of entry for a new challenger to dominant incumbents. In telecom, spectrum availability is the biggest constraint. The government needs to make ever more strenuous efforts to release spectrum from squatters like defence and analogue terrestrial broadcast. All spectrum must be shareable and free to be deployed for any type or generation of service. Some anti-competitive measures like a termination charge on text messages must go. For a large incumbent, the ratio of texts it terminates on its network to texts it has to pay other operators for termination on their networks is roughly one, meaning these termination charges are revenue neutral. A new entrant would, in contrast, end up paying out far more for termination than it receives. This net impost is apure entry barrier.

The government has done well to put 403.2 MHz of spectrum up for auction, rather than the 298.6 MHz proposed earlier. But the conditions for their use, too, need to be pro-competition. India needs to move to an all-data network, on which voice is just one functionality, as early as possible. This is imperative, to boost national productivity, enhance social mobility and unleash young India’s creative, entrepreneurial energies. To that end, remove restrictive policy and make more spectrum available.